Das "Involution" leert die chinesische Batterieindustrie aus. Wie kann man darauf reagieren?

In September 2025, the State Council Information Office held a series of themed press conferences on "High - quality Completion of the 14th Five - Year Plan". When answering journalists' questions, Li Lecheng, Minister of Industry and Information Technology, pointed out that the Ministry of Industry and Information Technology, together with relevant departments, has regulated the chaos in industries such as new energy vehicles and photovoltaics in accordance with laws and regulations. He emphasized, "Cultivating enterprises and industries is extremely difficult, while irrational competition can destroy an enterprise or an industry overnight. We will never tolerate such things happening."

Although no specific industry was directly named, the battery industry, which is known as one of the "New Three" along with new energy vehicles and photovoltaics, is also deeply mired in the quagmire of "irrational competition".

In June 2025, the China Battery Industry Association issued the "Initiative to Combat Malicious Competition in the Battery Industry", directly targeting the industry's chaos. In the same month, the Ministry of Industry and Information Technology held a symposium on industrial development. In August, the State Administration for Market Regulation also organized a meeting on the same theme. Both meetings clearly required the battery industry to firmly adhere to the safety bottom - line, avoid "involution - style" competition, and never cut corners or pass off inferior products as good ones.

In China's manufacturing industry, the battery industry is a rare one that comprehensively leads its counterparts in other countries in terms of market share, product competitiveness, and technological R & D capabilities. This enables the Chinese battery industry to shift from scale expansion relying on low costs to innovation - driven development relying on high value, thus becoming a model student in combating "involution".

01 The Current Situation of "Involution" in the Battery Industry

A price lower than the reasonable cost is the most important sign of "involution". The price of Chinese batteries has dropped by more than half in the past two years. The lowest quotation of lithium iron phosphate battery cells dropped by 65.79% from January 2023 to August 2025.

Such a huge price decline is not entirely due to "involution". From early 2023 to early 2024, the battery price decreased in tandem with the price of lithium carbonate, which was a normal cost transmission and had little to do with "involution".

Since mid - 2024, the raw material cost has been relatively stable, and the battery cell price has dropped to around the cost line of 0.4 yuan/Wh. However, the price decline has not stopped. Behind this, it is no longer a simple cost transmission. The "Initiative to Combat Malicious Competition in the Battery Industry" clearly points out that the reason for the irrational decline in battery prices is the spill - over effect of the price war in the new energy vehicle industry. Feedback from multiple battery enterprises also confirms this statement.

Multiple battery enterprises mentioned an online bidding platform of a new energy vehicle enterprise with rapid sales growth in the past two years. On this platform, each bidding enterprise can see its own quotation ranking in real - time, but cannot see the specific quotations of its competitors or the price difference between them. The only rule is that the lowest price ranks first, and the order share is strictly linked to the final ranking. The cheapest bidder gets the largest order. This mechanism forces suppliers to continuously lower their quotations in order to maintain their market share.

A salesperson from a second - tier battery enterprise described their quotation process like this: "For the first time, we remove the normal profit. For the second time, we cut the R & D and sales expense allocation. If it still doesn't work, for the last time, we remove the equipment and fixed - asset depreciation. As long as the cash cost is acceptable, we'll grit our teeth and place the bid."

When asked why they continued to participate in such a bidding that was bound to result in losses, he gave two reasons.

First, it's a bet on scale. According to their calculations, based on the supply price to this vehicle enterprise in 2024, an annual supply volume of 6GWh could achieve break - even. With the latest winning bid price in 2025, the break - even point has risen to 8GWh. This vehicle enterprise's product line covers both pure - electric and plug - in hybrid vehicles, and 8GWh is roughly equivalent to the installed capacity of 200,000 vehicles. Although it is extremely difficult, considering the sales growth rate of this vehicle enterprise, there still seems to be a glimmer of hope for reaching this "carrot" in the distance.

Second, it's a war of attrition. Most of the current battery production capacity was invested and built during the booming period of the industry from 2021 to 2023. In those two years, battery enterprises had sufficient funds, low financing costs, and local government subsidies, so the actual burden of building factories was relatively small. Although the huge capital expenditure at that time is reflected in today's costs in the form of fixed - asset depreciation, it does not immediately create a fatal cash - flow pressure. Relying on the savings from previous years, many enterprises can still hold on, waiting to outlast their competitors who entered the market late, have no profit accumulation, and higher factory - building costs.

Although the price war in the Chinese battery industry is fierce, it has neither led to industry - wide losses like in the photovoltaic industry nor affected many upstream industries like in the automotive industry and become a public event. One of the key reasons is that leading enterprises have not engaged in a fierce price war and their profitability is normal. The low - price spiral in the Chinese battery industry is mainly driven by second - and third - tier manufacturers.

Financial data shows that for CATL, the industry leader, although the product price decreased significantly from 2023 to 2024, it was mainly due to the spill - over effect of the significant decline in raw material prices. During this period, the gross profit margin of its battery business increased instead of decreasing. EVE Energy's price strategy is basically in line with CATL's. Although its gross profit margin is slightly lower, it has also remained relatively stable.

As a representative of second - tier battery enterprises, Sunwoda's price decline is significantly greater than that of the two leading enterprises mentioned above, and its gross profit margin has also declined accordingly. The industry average price of 0.4 yuan/Wh indicates that there are more second - and third - tier manufacturers with lower prices than Sunwoda, and the industry "involution" is particularly obvious.

This shows that leading enterprises have maintained their profit bottom - line by virtue of their advantages in technology, scale, and supply - chain management, while second - and third - tier enterprises have become the main participants in the price war under survival pressure.

02 The Consequences of "Involution"

As the low - price competition intensifies, various negative impacts gradually emerge. The "Initiative to Combat Malicious Competition in the Battery Industry" summarizes four major harms:

A sharp increase in quality and safety risks;

Difficulty in sustaining technological innovation;

The industry ecosystem falling into a vicious cycle;

Self - restraint in international competition.

A sharp increase in quality and safety risks is the most direct and fatal harm of "involution". In the battery field, it is manifested as enterprises reducing investment in material selection, process control, and quality management. Such corner - cutting behavior first occurs in areas where consumers cannot experience the impact in the short term, and which do not affect the product's passing of national mandatory standard tests or the product's paper parameters.

The aforementioned salesperson from the second - tier battery enterprise said that in the process of assembling battery cells into battery packs (Pack), there is a process of coating a layer of thermal insulation aerogel between the cells, which is used to delay the spread of thermal runaway in extreme situations. The initial process standard was to coat it in a "hui" (Chinese character meaning a square with a smaller square inside) shape for full coverage. As the cost pressure increased, the "hui" shape first became a "kou" (square) shape, then was simplified to a "er" (two horizontal lines) shape, and finally only a single horizontal line was left. High - specification safety configurations have become a major area for cost - cutting.

In order to improve the battery's energy density, charging speed and other parameters on paper, some manufacturers choose to compress the safety margins reserved at both the charging and discharging ends of the battery. For example, Volkswagen reserves a 5% safety margin at the discharging end and a 4% safety margin at the charging end for its battery products, which means that the actual available battery capacity is 91% of the total capacity, and the remaining 9% is used as a buffer for various extreme operating conditions and battery attenuation. Currently, many second - and third - tier manufacturers have reserved less than 5% safety margin in order to make the parameters look better.

In addition to the physical safety margin, the financial safety margin is also being reduced. Leading battery enterprises usually set aside a quality - assurance reserve fund for the batteries they have sold to cover potential costs in future battery retirement, recycling, or accidental accidents. This is also the part most likely to be cut during price cuts.

According to data released by J.P. Morgan, from 2019 to 2024, the quality - assurance reserve fund provision ratio of leading battery enterprises was mostly around 3%. The provision ratio for CATL's overseas projects exceeded 5% to cope with more potential risks in the overseas market, which is also an important reason why overseas customers favor CATL. The provision ratio of second - tier manufacturers is generally between 2% and 3%, and that of third - tier manufacturers is generally around 1%, and some have even dropped to zero.

The quality - assurance reserve fund is crucial for the rapidly developing energy - storage battery market. The quality - assurance responsibility of vehicle batteries is jointly borne by vehicle enterprises and battery enterprises. Unless there is an event like the large - scale defect of LG batteries in 2021, the quality - assurance cost is usually not high. However, the quality - assurance responsibility of energy - storage batteries is entirely borne by battery enterprises, and the scale of a single project is huge. Performance disputes caused by battery attenuation, compensation claims due to safety accidents, and disposal funds after retirement are all astronomical figures. If an enterprise lacks a quality - assurance reserve fund, these costs will ultimately be transferred to the government and society, and public resources will be used to fill the gap.

Although reducing the quality - assurance fund seems to lower the operating cost, it transfers the risk to the future. As the existing batteries enter the retirement period and the probability of safety accidents increases, the historical debts will break out collectively. At that time, the capital - chain break of a single enterprise may trigger a chain reaction, resulting in a large number of ownerless batteries being unable to be recycled and accident compensation being unaccounted for. This will not only damage the industry's reputation but also consume social resources and harm public interests. This risk - post - poning model where enterprises reduce costs and society pays the bill must be strictly guarded against.

The difficulty in sustaining technological innovation and the vicious cycle of the industry ecosystem are essentially two sides of the same coin, that is, the vicious cycle of "low price - low quality - low profit - low investment".

Financial report data shows that CATL's R & D expenses are almost three times the sum of the R & D expenses of several other listed battery enterprises. The high - intensity R & D investment has brought multiple new products with high technology and high performance, and high profits from these new products. In contrast, other battery enterprises generally have few new products and low market recognition. When enterprises spend most of their energy on the life - and - death price war, their investment in the future will inevitably become hesitant and conservative.

As Chinese battery enterprises accelerate their expansion overseas, "involution" has begun to spread to the international market and has a negative impact on the image of Made in China. A middle - level manager of an upstream battery material manufacturer was deeply pained when talking about this issue: "Overseas orders are one of our few sources of profit. It really hurts to see Chinese battery enterprises fighting among themselves while overseas vehicle enterprises reap the benefits. This self - destructive and mutually - undermining behavior has damaged the overseas market environment for all Chinese enterprises. Even if overseas customers admit that your products are really good, they still insist that Chinese products must be cheap."

He believes that in the current wave of Chinese enterprises going global, the battery industry is one of the few industries that has established a technologically leading image in the overseas market. This hard - won first - mover advantage should be cherished by all practitioners.

03 Breaking Through "Involution" Requires Higher - Dimensional Innovation

Combatting "involution" does not mean opposing competition, let alone forcing price increases through administrative orders. Simply and crudely reducing production capacity or setting a minimum price will distort market supply - and - demand signals and worsen the business environment.

For the battery industry, the real way to break the deadlock lies in the formation of a higher - dimensional innovation ecosystem across the entire industry. From 2021 to the present, Chinese battery enterprises have comprehensively surpassed their Japanese and Korean competitors in terms of scale and technology. It is the continuous, multi - dimensional, and systematic innovation that has driven Chinese battery enterprises to achieve this historical leap.

The innovation of Chinese battery enterprises can be found in every corner of the industry: in the material system, the lithium iron phosphate technology abandoned by Japanese and Korean battery enterprises has come back to life in the hands of Chinese enterprises and become a key factor in reversing the market pattern; in terms of structural innovation, CTP (Cell to Pack)/CTC (Cell to Chassis) technology has significantly improved the energy density of the battery system with little improvement in the chemical composition of the battery cells; in terms of charging efficiency, ultra - fast charging technology has continuously broken through the limits; in terms of manufacturing processes, various integrated production equipment and the concept of "extreme manufacturing" have continuously refreshed the records of production efficiency and yield rate.

History has proven that technological innovation is the foundation for the survival and development of the Chinese battery industry. Ending "involution" also depends on technological innovation, but this time the entire industry needs to jointly build an "innovation ecosystem".

In this upgrade from technological innovation to ecological innovation, the most urgent and core part is to create a good system for intellectual property protection, operation, and licensing.

Meng Xinghua, the secretary - general of the Changzhou Battery Technology Association, said, "In the rapidly evolving battery industry, intellectual property is the lifeline." When talking about intellectual property, the focus often falls on "protection", that is, how to prevent one's own intellectual property from being infringed. Although this is fundamental, in a mature industrial ecosystem, the value of intellectual property goes far beyond defense. The key to breaking the deadlock is how to make intellectual property an asset that can continuously generate revenue through efficient operation and convenient licensing, and then feed back more R & D investment.

The experiences of Japanese and Korean battery enterprises in intellectual property in the past few years are the best guide for Chinese enterprises.

From 2019 to 2024, two Korean enterprises, LG and SK On, had multiple rounds of intensive intellectual property litigation. In April 2019, LG sued SK On at the US International Trade Commission (ITC), accusing it of poaching 77 of its employees to steal technological secrets. In September 2019, SK On accused LG of infringing its patents in modules and batteries, and then LG counter - sued, claiming that SK On had infringed